IP standards in US-Peru FTA to affect talks with Colombia and Ecuador?posted 26-January-2006

ICTSD, BRIDGES Weekly Trade News Digest, 25 January 2006

IP STANDARDS IN US-PERU FTA TO AFFECT TALKS WITH COLOMBIA AND ECUADOR?

Stepping away from nearly one and a half years of negotiations that had also included Colombia and Ecuador, Peru signed a bilateral free trade agreement (FTA) with the US on 7 December 2005. Peru’s decision to do so, acquiescing to some US demands on intellectual property (IP) that had been proving controversial in the four-way negotiations, provoked criticism within and outside the region. Various academics, national and international civil society organisations, such as Oxfam and the Consumer Project on Technology (CPTech), and other trade observers have argued that the IP provisions of the US-Peru Trade Promotion Agreement are inadequate, in particular with respect to health and biodiversity related concerns. Supporters of the agreement counter that it secures unprecedented assurances from the US with regard to these very matters.

Ecuador and Colombia will try to revive their stalled FTA negotiations with the US in meetings scheduled for the next two weeks, and have agreed to come up with a common position on agriculture and IP in an attempt to strengthen their bargaining power during the talks.

FTA negotiations among the US, Colombia, Ecuador, and Peru began in May 2004 after Washington announced that it would not renew the Andean Trade Preferences and Drug Eradication Act, a trade preference scheme for the three countries, as well as Bolivia, scheduled to expire in December 2006. However, continuing disagreement over certain issues in the talks, including IP, had prevented the Andean countries from reaching a joint agreement with the US (see BRIDGES Weekly 30 November 2005). When discussions remained unfruitful through November 2005, Peru decided to move ahead alone, and struck a bilateral deal with the US in December.

An unhealthy outcome? CAFTA-plus IP provisions

At the outset of the negotiations, the three Andean countries had pushed for the inclusion of some form of public health safeguards in the actual text of the agreement, such as a direct reference to the flexibilities for the pursuit of such objectives that exist in WTO intellectual property rules. Instead of such a reference, Peru has signed a separate "Understanding Regarding Certain Health Measures" with the US. While this understanding notably emphasises that the obligations set out in the FTA’s IP chapter "do not affect a Party’s ability to take necessary measures to protect public health..." the legal value of such side letters as opposed to the integration of such measures in the actual text of an agreement, remains uncertain.

A greater source of concern, however, has been the new language included in the chapter’s provisions on ’data exclusivity.’ This refers to the protection period for the clinical test data that brand name pharmaceutical companies submit to government sanitary authorities when seeking the right to put a new drug on the market. This could potentially delay the entry of generic versions into the market, since would-be generic manufacturers would have to either wait for the end of the exclusivity period or run their own clinical tests in order to secure marketing approval for their products.

All recent US FTAs include data protection periods, in spite of consistent criticism by many health groups. However, while past FTAs, such as the Central American Free Trade Agreement (CAFTA), have required the protection of ’undisclosed’ information, the US-Peru FTA covers all safety and efficacy information submitted by firms. This is significant as this language could potentially include information on clinical trials that has already been made public, say by the government or through scientific publications, and could also set a precedent for future US FTAs. The FTA does include a separate letter specifically clarifying that the ’understanding’ on public health measures applies to the provisions on data protection, something that has not appeared in any FTA before. While Peru views this as a considerable negotiation success, it does not provide any further indication about the legal value of such side letters and understandings.

Additionally, the agreement text on IP does not provide for ’second-use patents,’ as the US had originally been seeking. It appears that Peru successfully argued that protection for new uses of existing inventions could lead to an effective extension of the term of protection, which could further delay the entry of generic competition in the market. Furthermore, the Peruvian negotiators also avoided the incorporation of a US proposal to allow the patentability of therapeutical methods, such as particular medical procedures.

Nevertheless, civil society organisations, academics and government officials have criticised the IP provisions in the US-Peru FTA for going beyond WTO requirements. Paul Hunt, a UN Special Rapporteur on public health, had warned the Peruvian government during the negotiations about their potential implications, cautioning that they could even "water down internationally agreed health standards, leading to higher prices for essential drugs that millions of Peruvians would find unaffordable." An economic assessment by the Peruvian Office on Intellectual Property and Competition had also predicted that the protection of test data could significantly raise the price of medicines in Peru.

Controversy over biodiversity and traditional knowledge

The US-Peru FTA may also prove to have considerable implications for national biodiversity and conservation policies. Links between trade and biodiversity can be found in the IP chapter, the environment chapter and a separate understanding outside the agreement’s text.

In the IP chapter, three new obligations will affect policies aimed at the sustainable use of biodiversity. The first is the obligation to ratify UPOV 1991, a treaty that requires the protection of new plant varieties through patent or breeders’ rights as opposed to other possible options. The second obligation relates to ’best efforts’ to make patent protection available for plants, potentially paving the way for the patentability of biotechnological inventions that have not fulfilled the access and benefit-sharing criteria set out in the Convention on Biological Diversity (CBD). The third obligation is an expansion of the scope of what is patentable in Peru today to include methods, as opposed to inventions alone.

During the negotiations, Peru had taken a very active stand on trade and biodiversity matters in other fora, namely the WTO, the World Intellectual Property Organisation (WIPO) and the CBD (see BRIDGES Weekly, 10 March 2004). This had generated expectations in the conservation community that biodiversity concerns would be part of any Andean FTA.

Article 18.8 of the environment chapter emphasises the parties’ commitment to the conservation and sustainable use of biodiversity and preservation of traditional knowledge (TK). The US-Peru FTA also includes for the first time an additional understanding on biodiversity and traditional knowledge. The understanding recognises, in greater detail than the environmental chapter, the importance of a) prior informed consent as the mechanism under which genetic resources should be accessed; b) equitable sharing of benefits derived from access to traditional knowledge and genetic resources and, most significantly, c) appropriate examinations to ensure the quality and validity of patents granted on inventions regarding biodiversity or TK. It also recognises that access to genetic resources or TK can be adequately addressed through contracts, which corresponds to the US negotiating position in WIPO and the WTO.

Neither the environment chapter nor the related ’understanding’ contain mandatory obligations, but only a set of best-endeavour clauses encouraging information sharing on biodiversity cooperation programmes and for the purpose of evaluating the existence of ’prior art’ in inventions related to TK. Thus, critics argue that the biodiversity provisions in the FTA do not improve the status quo to effectively tackle concerns over misappropriation of biodiversity and TK. Others counter that the very fact that the US has accepted and agreed to the inclusion in an FTA of a series of concepts regarding biodiversity and traditional knowledge is already an achievement, particularly given that the US has never ratified the CBD.

Colombia and Ecuador join forces

Peru’s agreement to the above obligations came as something of a surprise to observers of the negotiations, in light of its past objections to some of the provisions present in the final text. Trade sources report that the Peruvian government had advocated the option of waiving data exclusivity provisions in case of a national emergency (see BRIDGES Weekly, 30 November 2005); it is unclear whether the understanding on public health and its clarifying side letter data protection will suffice to do so in a case of dispute. Furthermore, Peru had called for the incorporation of stronger provisions on biodiversity, including the disclosure of origin and minimum standards for the protection of TK.

The US’ FTAs have tended to become templates for its subsequent trade deals. It is possible that the US will seek to use this agreement as a precedent in its negotiations with Colombia and Ecuador. In a reaction to the US-Peru FTA, Colombia and Ecuador have agreed to develop joint positions on negotiating issues, among them IP.

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